The “Amazon Tax” Saga Continues

Some say this March wasn’t a great month for Amazon. First they were sued for withholding money from seller’s accounts, then eBay came out with guns blazing by introducing a new seller fee structure, then as the month drew to an end, the New York Court of Appeals rejected arguments from Amazon and Overstock.com that they should be exempt from collecting state tax.

As covered a while back, Amazon.com and Overstock.com were challenging a 2008 law that requires online sellers to collect tax on purchases made by New York residents. At the heart of the matter — or rather, lawsuit — is that there are literally thousands of affiliates who pay Amazon a commission to link to their website. Amazon and Overstock argued that they should be exempt from the sales tax, but the court ruled that since they are actively soliciting business in the state of New York through affiliates, they should share in the tax burden.    

This is something that Amazon has been running up against more and more frequently. Two years ago, Illinois passed what was known as the “Amazon Tax” (aka “Main Street Fairness Act”). This measure forced online sellers who didn’t have physical storefronts in the state to collect and pay taxes on purchases from Illinois residents.

Because Illinois refused to budge on the issue, Amazon and some of it’s affiliates simply left the state – causing a “reverse effect” on state revenues. As of last year, the law was declared “unconstitutional” and was widely regarded as unsuccessful (the IL Dept. of Revenue disagrees, and plans to appeal). Meanwhile, as similar laws have come up in other states, such as California and New Jersey, Amazon has managed to delay the issue by agreeing to build warehouses — which will create jobs, and supposedly make up for sales tax revenue losses.

In New York, Amazon is considering an appeal. It seems unlikely that they would pull out of the state, so how this all plays out remains to be seen. As other states continue to pass similar laws Amazon may have to give in, but for now, they don’t seem to be going down without a fight.

About our Guest Blogger This guest post was contributed by Kat Simpson. Kat is a trusted eCommerce author, speaker, educator, and entrepreneur. Kat Simpson has been a successful eCommerce merchant for over 10 years; is an eBay Education Specialist and Gold Level PowerSeller, as well as a successful Amazon merchant. Currently Kat is the hosts the popular weekly eCommerce Podcast That Kat Radio.

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